Innovation:The Risk of Inaction is Larger Than The Risk of Action

It has been said that the day before something is truly an innovation, it’s a crazy idea. if its not a crazy idea, its an incremental improvement, not a true innovation.

Currently we have councils who are playing it safe and making small incremental improvements. The question that is not being asked today is; what is the risk of not innovating? what is the risk of not thinking differently?

Risk vs Reward

Put simply, decisions are made using this formula, risk vs reward. Reward being a positive outcome and risk being the potential negative outcomes.Traditionally speaking, in order to get a higher reward, you must take more risk. As people tend to be more critical of failure than praising of success, we as humans have successfully built up a culture where governments won’t take any risk, thus get almost no reward for their efforts.

Understanding Risk

The calculation of risk is far from something humans can be considered good at. For example, studies show that in the stock market, index funds (investing broadly across the economy) out-perform managed funds (where a person picks stocks for you) just about every time.No one knows what will happen in the future (not even me!), so we base all our decisions on data and experience of what happened in the past. The danger of this is that many of the problems of the past aren’t the problems of the future.

Experience is the enemy of Innovation

Let me clarify here, not all experience is the enemy of innovation, but rather using it as your sole basis for decision making it.

When people talk about experience, they are generally trying to tell people they can predict the future. For example, an experienced police officer with 20 years experience in violent crime, may be able to identify early when a violent incident is about to take place. This experience is extremely useful in dangerous situations, but maybe not as useful in helping you buy a house for example.To help take experience bias out of the equation, Eric Ries proposes a new form of accounting specifically tailored for testing new ideas. Its called innovation accounting and centres around getting data from the present, rather than getting it from the past.

Innovation Accounting

The basis of innovation accounting is that all the information you need about an idea, product or service exists outside the room you’re sitting in. Organisations who make decisions about the future without first testing those assumptions, are the ones who are making the biggest blunders in business today.

Working Example

We have recently had a roll out of Green Bins in Bendigo. There was a decision, then a trial and soon there will be 10’s of thousands of bins deployed in bendigo.Using the innovation accounting framework above, lets see how a startup would approach this problem. Lets start with a key assumption; people will use the green waste bins for their food scraps. To test this assumption, we might do the following;

Build: Target a group of 50 random houses and deploy green bins with instructions

Measure: Pick up the bins in 2 weeks and measure what percentage of the bins had food scraps in them.

Learn: x% of bins did not contain food scraps. Lets contact those houses and find out why

This process is different to a trial because you are trying to test an assumption, not the validity of the program. The results of tests like these might have discovered that people don’t like having another bin in their house and refuse to use it for that reason.That information would help tremendously when making a decision. Note, this was about gathering data from a real world experiment, not leaning on past experience to inform decision making.

Conclusion

We need to start taking risks and innovating in the local government arena. This does not mean throwing money at things that look like they will be the future, it’s about really finding out how people behave and what they really want.Together, lets bring innovation into council and start getting massive rewards, not just small ones here and there.